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14 Jul 2008

A Copenhagen based Cayman fund, DanFonds, is trying a novel approach to the hedge fund market by launching its ‘Frontier Markets Fund’, a hybrid between the public market hedge fund approach and the private equity model.

In a press call with Alex Akesson on Friday, CEO of DanFonds, Daniel Broby referred to 'peak oil', and the 'commodity super cycle' and also how the writing off of debt by the Paris club have opened the market for frontier funds.

"What we are seeing is generational change; the industrialisation of the final countries that had been left behind." Broby said, "These are not markets for the faint hearted. They are corrupt, illiquid and difficult to access. On the other hand, that is compensated for by the risk premium and the expected returns."

With a philosophy of 'Globalisation is just an extension of industrialisation' and that 'frontier markets are the next emerging markets', their website says that frontier markets are at the very edge of the investable public securities universe.

However, there is potential for high return. With a combined market capitalisation of around $1.7 trillion, frontier markets are in the early stages of development and growing towards entry into the emerging markets indices.

"You either believe in the opportunity or you do not. We don't try to convince investors. We mearly structure the best way to capture that opportunity." Broby concluded.

When asked to comment on the new fund launches, Broby's staff responded, "200 years ago California was a frontier market." said Alexandra Hayles, Country Analyst.

While Klaus Jeppesen, Head of Risk commented, "traditional risk models just don't work in these countries. You have to start with a blank spreadsheet." "There are plenty of opportunities in Francophone Africa. You just have to know where to look for them." Brice Beumo, Director of DanFonds finished.

Danfonds operates from two locations in Denmark, its operational offices in the center of Copenhagen and its registered offices in Martofte. It has also established access to offices in selected frontier market locations using the facilities of Regus Worldwide.

Hugh Hefner has reportedly signed an agreement with Agilo, the London hedge fund that owns a Sports Cafe on Haymarket in London’s West End according to the TimesOnline.

The Playboy Club in the capital is reportedly set to open in 2010 to offer gaming at roulette wheels and blackjack tables. The original Playboy club on Park Lane in Mayfair was closed 27 years ago after a police raid over suspected gambling irregularities, despite no subsequent evidence of wrongdoing.

“We are looking for opportunities around the world. London will be logical for us. We had some very good years there,” Times Online quoted Dick Rosenzweig, executive vice-president of Playboy and Hefner’’s right-hand man, as saying.

Playboy could win its licence in as little as two months after applying if it meets all the requirements.

The former London club opened opposite Hyde Park in 1966, six years after the first Playboy Club was launched in Chicago. For 15 years, the London club, on five floors, was a welcome distraction from worries such as the IRA, strikes and riots.

"Nicknamed "the Hutch on the Park", the London venue's clientele included actors Sean Connery, Michael Caine and Joan Collins, and footballer George Best, who married former bunny Angie MacDonald-Janes.

The club was run by Victor Lownes, an American who became the highest-paid executive in Britain. Lownes, now 80, married Marilyn Cole, a former playmate of the year. He said: "It was a huge success and ran like a dream. We had a discotheque in the basement, several restaurants, a VIP room and a casino with roulette and blackjack. The average bunny lasted two years and then married a millionaire.

Jeff Georgino, Playboy's senior vice-president, said: "We are actively looking at locations which are on the market in London. We would love to get a casino licence ... It all depends on that."

"The firm has long been known for its strength in serving institutions and for its deep expertise in hedge funds." Dr Au said, "Asian investors are increasing allocations to hedge funds because of the absolute, uncorrelated returns and flexible investment strategies they can offer. FRM is in a strong position to deliver performance and products for this important and growing investor base."

With offices in Europe, Asia, North America and Australia, the new Hong Kong office is an effort to expand business efforts in Japan and Korea.

Dr. Au will join in September from HSBC, where he has been working for the past 11 years, most recently as Head of Institutional Business in Asia Pacific.

FRM opened its Hong Kong office in May 2008, building on its significant presence in Asia, including offices in Tokyo and Sydney, opened in 2000 and 2001 respectively. As one of the largest independent fund of hedge fund groups, FRM manages over $15 billion in assets for institutions and other sophisticated investors, including approximately 300 pension funds worldwide.

Dr. Au currently serves as Chairman of the Hong Kong Securities Institute and is a previous Chairman of the HK Investment Funds Association. In July Dr. Au was awarded the Medal of Honour (MH) by the Hong Kong SAR Government for his valuable contributions to the securities and asset management industry.

Alex AkessonEditor for HedgeCo LLCEmail: alex@hedgeco.net

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